in [Event] Ask the Experts: Investments: Stocks, Crypto, & More
2037150
You'll need to sign in or create an account to connect with an expert.
Every site I have read says specifically that the 10200 will be exempt from 2020 taxes, not 2021. In fact from what I have read you will not get the same break in 2021 if you got unemployment benefits.
The American Rescue Package of 2021 was approved by Congress and is expected to be signed by President Biden on March 12, 2021.
This package makes the first $10,200 of unemployment benefits received in 2020 non-taxable. The IRS has not yet provided any instructions on how to calculate this.
The IRS will have no choice but to extend the filing deadline from April 15 to at least June 15 in order to provide time for tax preparation services like Turbotax to make changes to their software programming.
If you have NOT filed your 2020 tax return, my advice is to wait to file at a later date.
If you ALREADY filed your return, wait for instructions from the IRS in a letter that you will most likely receive with instructions. You will most likely have to amend your 2020 tax return, as the tax credit will only apply on your 2020 federaltax return.
Any unemployment benefits received in 2021 will NOT be affected by this law change, unless it is once again approved by Congress at a later date.
If you normally file a Married Joint return, and both you and your spouse received unemployment benefits, it may be advisable to file Married Seperate returns so that both of you can claim the credit.
Actually it does take effect on the 2020 tax returns yes I would amend the return president bidan sign it Thursday or Friday the 11th or 12th of march
Everyone needs to stop and WAIT for the IRS to put out instructions on how the IRS will be handling this situation. The details are still very vague ... all we know is $10,200 of unemployment will not be taxable but is that per person ??? Would a married couple get a max of $20,400? Will the IRS amend the returns for those who have already filed ? Will the filing deadline be extended ???
{Update]
IRS will have to recalculate all returns with UI -- something it does anyway when processing -- and apply the new rule.
Filers with the new software will have the correct tax.
Filers with the old software will have their tax corrected.
Nothing special about that.
And where will find updated forms? Literally no one has them printed nor their software updated. Are you going to handwrite your return?
Forbes is not a tax matters authority either. As the OP stated, wait for the IRS' guidance.
Correct. Unemployment compensation is included in MAGI, regardless of if it's taxable or not.
https://www.healthcare.gov/income-and-household-information/income/#magi
😱 Holy crap!! I never heard a word about them making the first $10,200 in unemployment benefits tax exempt until after people like me filed our taxes and found that we were being hit with some pretty hefty tax bills. I think this is going to be a real nightmare to correct. I always get a refund so I file my taxes as early as possible and this year was no different. (or so I thought) I filed my taxes electronically as soon as the software allowed it and because I was unemployed for most of 2020 AND I did not have any taxes being withheld from my weekly benefits, I ended up owing over $1,200 in federal tax. Because I owed them over $1,000, I was charged a penalty and I was told that I will need to make estimated tax payments in each quarter of 2021. Figuring that it is what it is, I went ahead and e-filed my returns and arranged for my federal taxes to be paid from my bank account on April 1st.
I honestly don't see how the IRS will be able to correct this. I was curious how much of a difference it would make, so I experimented and ran my numbers again with $10,200 less in unemployment, and it looks like I will now be due a refund of most of the federal tax that I was charged with my initial filing, and it removes the penalty that I was charged for owing over $1,000 and it removes the quarterly estimated tax payments that I was told I need to make in 2021. I'll be shocked if they can correct this at all, and especially if it happens before April 15th when my first quarterly estimated tax payment was supposed to be paid. I guess one bit of good news I can look forward to will be if the $1,400 stimulus payment gets into the bank before the 1st of April when I arranged for the IRS to get paid money that I really will now not owe them... 😕
The timing of this bill is indeed unfortunate however it is not unprecedented and it will all work itself out eventually but everyone needs to be patient and WAIT for the IRS guidance on how to handle these changes. Don't be in a rush to do anything until the instructions are issued.
The good news is that the reasoning for this tax reducing benefit was at least partially due to the folks in your situation (didn’t realize they could or should withhold the 10% of unemployment payments).
More importantly, why would anyone file their taxes before the deadline when they owe money to the IRS? (Sorry, @amt2020, you walked into that one).
When I first heard about the Senate adding this provision for reducing taxes on unemployment compensation, I thought (like a lot of folks) it was pertaining to the 2021 tax year (just like the child tax credit changes; added unemployment $300; etc.). Lo and behold, it’s the only provision (to my knowledge) for the 2020 tax year (unemployment basically 9 months, March through December). Now they extend unemployment benefits for another 9 months into 2021, yet no tax break. WTF?
It is retroactive for 2020, so if you filed this year already, you will need to file a 1040X for the change.
Yes, you have have to file an amended return (form 1040X). TurboTax now let’s you e-file amended returns via their program.
Do not try to file for the unemployment change yet. The IRS still has to make changes and so do all of the tax software companies. You will have to be more patient. The law has not even been signed yet.
TurboTax will update the software for the unemployment but there is no timeline yet.
It can take weeks to several months or more for the changes to be made to tax software. First the IRS has to change its forms. The tax software has to be changed; the IRS has to test and approve of the software. Do not expect changes in the software to happen quickly. TurboTax may have more information in the near future AFTER the bill is signed into law, and some more details emerge about how Congress and the IRS will implement the changes.
THANK YOU for mentioning what so many others failed to mention in this thread....that the IRS can issue an extension to file taxes (they have in the past, and will likely do so in this situation.) So if you owe thousands and this bill would drop that tax bill to zero, just wait. No need to float Uncle Sam a huge payment that will take them months to give back to you. Have patience.
Still have questions?
Questions are answered within a few hours on average.
Post a Question*Must create login to post
Ask questions and learn more about your taxes and finances.
user17525168329
Level 1
in [Event] Ask the Experts: Investments: Stocks, Crypto, & More
TR2022
Returning Member
av95
New Member
J1Professor
New Member
feuerbright
Level 1